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Cooper’s horse barrel-racing activities. Respondent contends
that Mrs. Cooper’s horse barrel-racing activities were not
engaged in with the primary objective of earning a profit.
Discussion
The Commissioner’s determinations are presumed correct, and
generally, the taxpayer bears the burden of proving otherwise.
Welch v. Helvering, 290 U.S. 111, 115 (1933). Because
petitioners did not comply with the requirements of section
7491(a)(2), section 7491(a)(1) is inapplicable here. Under
section 7491(c), respondent has the burden of production with
respect to petitioner’s liability for the additions to tax.
A. Mrs. Cooper’s Horse Barrel-Racing Activities
Section 183(a) provides that “if * * * [an] activity is not
engaged in for profit, no deduction attributable to such activity
shall be allowed under this chapter except as otherwise provided
in this section.” Thus, to properly deduct certain expenses, a
taxpayer must engage in an activity with an actual and honest
objective of making a profit. See Dreicer v. Commissioner, 78
T.C. 642, 645-646 (1982), affd. without opinion 702 F.2d 1205
(D.C. Cir. 1983). Moreover, the Court of Appeals for the Fifth
Circuit, in which jurisdiction petitioner resides, has stated
that taxpayers whose activities are challenged under section 183
“bear the burden of proving that their activities * * * were
engaged in with the primary purpose of earning a profit.”
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